Special Risk Capital Management LLC

Market Giving Mixed Signals January 23, 2011

O.K. . . . We were expecting a correction somewhere in here. After all, its been grinding higher for months, which is, atypical. How “bad” was this past week? Let’s take a look:

Small Capital Russell 2000: -4.26%

S&P 500 Index: -0.76%

Nasdaq Composite Index: -2.39%

Dow Jones (30) Industrials: +0.72%

From this data it is obvious where the damage was done, small cap. and tech stocks, the very same sector groups that have out performed the overall market this past year. Time for a breather? Yes, very likely. But how much? In my opinion, watch all of the markets, that is the broader S&P 500 as well as NASDAQ Composite (the Dow Industrials 30 is to narrow for me).

If we see weakness beginning to flow over into the Large Cap. S&P 500, well that is NOT a good sign. One level that I’m watching on the S&P 500 Index is 1258. That’s a significant support level. A close below that would definitely get my attention. Until then, watch individual holdings. Tech, precious metals and most commodity stock got hit significantly; but as I said, they also gained the most.

Corrections are normal and actually “healthy”, IF they don’t go too far. So far, so good, but that could change via earnings or geo-political news. The market is susceptible to that right now. Time to keep both eyes open.

Have a good week.

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